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market worry portugal and spain

28 EU member states Caichang night by a total of 85 billion euros rescue package in Ireland, so that the latter become the Greeks, the second debt crisis of sovereignty was forced to accept outside aid euro zone members. This program seems unlikely to dispel the market crisis on the European debt expected to spread to neighboring countries. Day, the EU side also on the future establishment of a permanent crisis in the euro area has drafted a blueprint for coping mechanisms, according to the blueprint, the private sector creditors will bear part of the rescue costs.

Greece, Ireland, far below the foreign aid received

16 euro zone finance ministers anxious to prevent the crisis spreading to Portugal and Spain, in time for the panic before the market opened on Monday reached an agreement, unanimously approved an emergency loan scheme for the Irish.

Total of 85 billion euros of bailout funds will come from three sources: First, the European Union and the International Monetary Fund (IMF) the joint establishment of the 750 billion euros standby rescue mechanism, and a total of 62.7 billion euros, accounting for the largest one; the second is the United Kingdom, Sweden and Denmark, respectively, in bilateral loans, total of 4.8 billion euros; third Irish national pension reserve fund to use domestic resources raised 17.5 billion euros, mainly for the banking rescue. In other words, the Irish foreign aid actually received 67.5 billion euros, well below the 110 billion euros in Greece.

Relief funds will be used in two aspects: First, because the real estate bubble burst in and rescue the struggling Irish banks, a total of 35 billion euros, of which 10 billion euros to recapitalize banks in Ireland, and the remaining 25 billion euros, as contingency funds; II is used to meet the financial needs of the Irish Government, a total of 50 billion euros.

Wren said that because of different funding channels, to provide relief for the Irish when the loan period from 3 to 7 years a half years, the interest rate will be slightly different, but to be finalized in the coming week. This gives Ireland a tail left to get help.

Earlier, the Irish media, may be as high as 6.7% interest rate, but love the day of Prime Minister Brian Cowen said the average interest rate of 5.8%. Rehn said that the average lending rate is about 6%.

Interest rate relief when Greece was 5.2%, but the loan period is only 3 years. Rehn said the EU rescue package will cf Ireland, the appropriate relaxation of the Greek part of the repayment period. As an additional condition, the Irish government will implement the banking sector restructuring, to vigorously tighten fiscal and economic reforms. Rehn said that this is the three pillars of the Irish aid program.

Between the two countries into a market bull in Puxi

Reuters article said that Ireland's assistance programs or to temporarily calm the eurozone bond market in the face of financial pressure, but Portugal and Spain could once again under pressure, the two countries last week, the 10-year Treasury yields sharply higher. The article also quoted analysts as saying that bond investors will look to invest in Portugal, Spain, Italy and Belgium, as the euro area is full of structural defects, "(except Germany) the euro zone sovereign debt is not safe."

However, the Spanish Prime Minister Jose Luis Rodriguez Zapatero said last week that Spain would not like Ireland and Greece, as seek outside assistance. Portuguese Prime Minister also said something similar.

Analysis, from the perspective of macroeconomic fundamentals, Portugal and Spain do not need aid, but the crisis has developed leading market sentiment on the grounds that the market worries push up yields, increased financing costs, thereby pushing the EU member states critical point to the crisis.

In theory, the European Union and the International Monetary Fund have the funds to help Portugal and Spain. Founded in May of this year both the financial stability of European institutions, the scale of the initial fund-raising in aid of 7,500 million euros, after the Irish aid, as well as 665 billion euros. Greece's 110 billion euros of aid is a separate arrangement. If Portugal to seek EU aid, most analysts believe it will need 100 billion euros, financial stability in Europe, within the capacity of institutions. Spain needed assistance relatively large economies of scale, Portugal, Ireland and Greece, and twice the scale of assistance. Even so, the EU also have enough funds to help Spain, but almost all the funds will be exhausted. Analysts can not help but worry that if Belgium or Italy, is a problem, how should the EU do.

Determine the long-term crisis resolution mechanisms

In order to appease the panic in financial markets, the euro zone finance ministers, 28 members of the euro zone is also on the future establishment of a permanent mechanism for crisis response reached a preliminary consensus, agreed to let private investors in the future as a sovereign debt crisis of the loss-sharing.

Ministers agreed that a new large-scale relief fund undetermined amount. It will replace in 2013 created in May of this year, is being used to help Ireland's temporary relief tool. According to the terms of the new funds, if countries are considered insolvent, its creditors may be mandatory for debt restructuring, and then the fund will aid the implementation of its possible implementation.

Finance ministers reached a preliminary agreement include: the establishment of a country in the rescue plan is required before the IMF, the European Commission and European Central Bank to discuss a problem that occurs when a country to pay the question of how to determine which is unable to award debt or short-term cash flow problem. Awareness of the problem to be euro-zone member countries by the unanimous vote of all finance ministers. It is reported that this "bankruptcy court" type of adjudication is based on the International Monetary Fund deal with problems over 20 years experience of sovereign debtors come.

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(saran). Submitted on Wed, 1 Feb 2012 Time: 6:24 AM

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